A GST invoice many times contains HSN and SAC Code. If you’ve ever stumbled across a GST invoice that looked more like a cryptic puzzle than a bill, chances are you’ve seen something like “HSN 1006” or “SAC 9983” stamped on it. Confused? Don’t worry — you’re in the same boat as thousands of business owners, freelancers, and curious taxpayers in India.
So, what are these mysterious codes? Why are they popping up on your bills, forms, and returns? And most importantly, do you really need to know about them?
Spoiler alert: Yes, you do!
These codes — HSN and SAC Codes — are the secret sauce behind the Goods and Services Tax (GST) system. They keep everything sorted, categorized, and running like a well-oiled machine.
This guide is your no-jargon, plain-English breakdown of the HSN and SAC Code: Full Form, Meaning, and Uses in GST — with all the quirky explanations, real-world examples, and need-to-know info to keep your business (or brain) running smoothly in 2025.
What Is an HSN and SAC Code?
HSN Code – Full Form & Meaning
Let’s start with HSN. It stands for Harmonized System of Nomenclature. Sounds fancy? It’s just a global system of classifying goods.
It was developed by the World Customs Organization (WCO) and is used in over 200 countries! This code classifies products using a system of numbers to help in identifying and taxing them properly.
In short:
HSN = Used for Goods
SAC Code – Full Form & Meaning
And now for SAC, which stands for Services Accounting Code. If HSN is for goods, SAC is for services.
Every kind of service — from IT support to a spa treatment — has its own SAC code. Just like HSN, this system is used for levying GST on services.
In short:
SAC = Used for Services
Why Were HSN and SAC Codes Introduced Under GST?
Let’s be real — GST was supposed to simplify the chaotic web of taxes. And to do that, the government needed a way to classify goods and services uniformly across India.
So, what better way than to adopt a global system for goods (HSN) and create a specific one for services (SAC)?
Here’s why HSN and SAC codes are a big deal in GST:
- ✅ To standardize product and service classification
- ✅ To help in accurate GST rate identification
- ✅ To make tax compliance simpler
- ✅ To ensure global trade compatibility
- ✅ To avoid ambiguities in product/service categories
HSN Code Structure: The 2, 4, 6, and 8-Digit Mystery
Hold onto your seat — we’re going a little nerdy here (but stay with me!).
The HSN code is built like a ladder. The more digits, the more specific the classification.
| Digits | Meaning | Used By |
| 2-digit | Chapter | Broad category |
| 4-digit | Heading | Sub-category |
| 6-digit | Sub-heading | Specific item |
| 8-digit | India-specific classification | Exporters/importers |
Example:
Let’s say you’re selling Basmati Rice.
- 10 – Cereals (2-digit)
- 1006 – Rice (4-digit)
- 100630 – Semi-milled or wholly milled rice (6-digit)
- 10063020 – Basmati Rice (8-digit)
Boom! That’s how detailed the system gets.
SAC Code Format: How Do Services Get Classified?
Unlike goods, SAC codes are purely numeric and follow a different structure. They are 6-digit numbers where the first two digits are 99 (because all services start with 99), and the remaining four digits signify the specific type of service.
Example:
- 9983 – Other professional, technical and business services
- 9995 – Services of membership organizations
- 9986 – Support services to agriculture and forestry
So, if you’re running a digital marketing agency, your SAC code could be something like 998365.
When and Where Are HSN and SAC Codes Used in GST?
You may be wondering — “Okay, I get the structure, but where do these codes actually show up?”
Here’s where HSN and SAC codes pop up:
- 🧾 GST Invoices
- 📋 GST Returns (GSTR-1, GSTR-3B, etc.)
- 📦 eWay Bills
- 🧮 GST Rate Calculation
- 📑 Input Tax Credit Documentation
- 🚚 Export/Import Declarations
And yes, they’re mandatory — not optional — if your turnover crosses a specific threshold.
GST Compliance: Who Needs to Mention HSN and SAC Codes?
Not everyone needs to memorize these codes. The need to use HSN/SAC codes depends on your annual turnover.
For Goods (HSN Code Requirement):
| Annual Turnover | HSN Digits to Mention |
| Up to ₹5 crore | 4-digit HSN (optional on B2C) |
| Above ₹5 crore | 6-digit HSN (mandatory on all invoices) |
For Services (SAC Code Requirement):
SAC codes are generally mandatory for all registered service providers, irrespective of turnover. So even freelancers and consultants, listen up!
Benefits of Using the Right HSN and SAC Code
Using the right code isn’t just red tape — it can actually help your business run smoother.
Let’s break down the perks:
- 🔍 Clear Classification – Avoid disputes and confusion.
- 💸 Correct GST Rate – Prevent undercharging or overcharging GST.
- 🧾 Invoice Accuracy – Your bills will always match compliance needs.
- ✅ Claiming Input Tax Credit (ITC) – Essential for proper credit claims.
- 🌎 Seamless Exports/Imports – Especially with HSN being globally recognized.
How to Find the Right HSN or SAC Code for Your Product or Service
So you’re ready to code up your business — but where do you even start?
Here’s how to find your perfect HSN/SAC match:
- 🔍 GST Portal Search Tool – Use https://gst.gov.in and search for HSN/SAC codes.
- 📦 Customs Tariff 2025 – Especially useful for exporters/importers.
- 🧾 Invoice Generator Tools – Many invoicing software tools auto-suggest codes.
- 📱 GST Apps – Several apps like “GST Rate Finder” help locate the correct code.
- 💼 Consult a Tax Pro – If you’re unsure, don’t play the guessing game.
Real-World Examples: HSN and SAC Code in Action
HSN Code Example – A Toy Manufacturer
Product: Plastic Dolls
HSN Code: 95030030
GST Rate: 12%
SAC Code Example – A Graphic Designer
Service: Logo Design
SAC Code: 998391
GST Rate: 18%
Common Mistakes to Avoid with HSN and SAC Codes
Even seasoned businesses sometimes fumble with HSN and SAC codes. Don’t be one of them.
Watch out for these pitfalls:
- Using a generic code just to fill space
- Quoting a wrong tax rate for a misclassified product
- Copying someone else’s code without verification
- Forgetting to update codes when product/services change
- Ignoring the turnover threshold rules
Frequently Asked Questions (FAQs)
Q1. What is the full form of HSN and SAC code?
HSN stands for Harmonized System of Nomenclature (used for goods) and SAC stands for Services Accounting Code (used for services).
Q2. Are HSN and SAC codes mandatory in GST invoices?
Yes. Depending on your turnover and business type, you must mention the appropriate HSN or SAC code on your GST invoices.
Q3. Can one product or service have more than one code?
Not usually. Each unique product or service should have a single, correct HSN or SAC code. However, multiple items on a single invoice will each carry their respective codes.
Q4. What happens if I use the wrong HSN/SAC code?
Using the wrong code can lead to penalties, mismatched returns, or blocked Input Tax Credit. Always verify before using.
Q5. Where can I find the official list of codes?
You can visit the official GST portal, check government notifications, or consult the Customs Tariff of India.
Q6. Is SAC code required for freelancers?
Yes, if you’re offering services under GST, you must use the correct SAC code—even as a freelancer.
Conclusion:
Let’s be honest — GST compliance can feel like navigating a maze blindfolded. But once you get the hang of HSN and SAC codes, it’s like flipping on the lights. Everything starts making sense.
These codes aren’t just bureaucratic fluff. They’re the building blocks of how your products and services are identified, taxed, and filed under GST.
Whether you’re running a digital startup, a brick-and-mortar store, or freelancing from your home office, knowing your HSN and SAC Code is non-negotiable in 2025 and beyond.
